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on European Economics |
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Issue of 2026–06–22
eleven papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Cochrane, John H.; Garicano, Luis; Masuch, Klaus |
| Abstract: | In the last two decades, the euro area was hit by multiple crises. Fiscal and monetary emergency actions broke important constraints and expectations set by the euro’s founding principles. Several euro countries broke fiscal rules. As politicians expect European Central Bank (ECB) support for public debt in any crisis, they have weak incentives to build fiscal buffers, or to undertake needed fiscal reforms. Consequently, fiscal spaces for additional borrowing are dangerously narrow. Banks also expect ECB support, and bank regulators still treat sovereign debt as risk free. Consequently, banks hold large quantities of sovereign debt. Sovereign restructuring then imperils the financial system. Reforms are necessary to strengthen the euro, and with it the benefits the euro provides to euro area citizens. Euro countries must face market discipline to give incentives for responsible fiscal policy and economic efficiency. In the end, euro countries must be able to default, i.e. restructure their debt, in an orderly manner without this creating a major financial disaster. This possibility requires a banking regulation reform that avoids the current incentives for banks to accumulate large exposures to public debt, in particular of their own domestic sovereign. The euro area needs a well-constructed European Fiscal Institution (EFI) for the management of fiscal troubles and balance of payment problems of euro countries. The EFI needs all necessary powers, tools, the ability to make swift decisions, and sufficient capital financed by member states, to fully unburden the ECB. The ECB should reduce its footprint to protect its independence, its balance sheet, and thereby its ability to fight inflation even in times of fiscal trouble. The ECB must stop quashing true market signals that give incentives for sound fiscal policies and prudent risk management of banks. The ECB should stay away from quasi-fiscal interventions, such as balance sheet policies that favor fiscally fragile countries and their bondholders and create fiscal transfers between countries and from taxpayers to banks. |
| Keywords: | monetary policy; fiscal policy; monetary union; ECB; sovereign default |
| JEL: | E42 E52 E58 E62 |
| Date: | 2026–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:138669 |
| By: | Tommaso Frattini; Camilla Piovesan |
| Abstract: | The EU hosts a record 64 million foreign-born residents, with migration continuing to grow strongly, though unevenly across countries. While Germany and Spain dominate in absolute numbers, smaller Member States often face greater relative pressure. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:crm:crmrep:2603 |
| By: | Matthieu Bussière; Johanna Gilbert; Olesya V. Grishchenko |
| Abstract: | Using data on euro-area household inflation forecasts from the European Commission Consumer Survey, we show that households' perceptions of recent price changes play a key role in the formation of their inflation expectations. Such a relationship remains robust when we account for specific inflation components, household characteristics, and macroeconomic conditions, even though the perceptions-expectations relationship is heterogeneous across countries. These results highlight the importance of perceptions about inflation for the conduct of monetary policy. |
| Keywords: | surveys; inflation expectations; monetary policy communication; central banks |
| JEL: | E31 E58 E62 |
| Date: | 2026–06–03 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:103378 |
| By: | Tommaso Frattini; Giuseppe Pulito |
| Abstract: | Employment in the EU has risen for all groups. EU migrants have the highest rates, non-EU migrants have improved but still lag, mainly due to lower employment among non-EU women, while men’s rates are similar across groups. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:crmrep:2503 |
| By: | Palligkinis, Spyros; Jo, Jae Hyun; Demartis, Stefano |
| Abstract: | We assess the effectiveness of supervisory activities in mitigating credit risk stemming from banks’ commercial real estate portfolios. We analyse two activity types deployed by European banking supervisors: (a) on-site inspections, which assess in depth banks’ risk-taking and internal controls, but can only be selectively applied, and (b) off-site targeted reviews, which survey risk management practices across institutions, are less intrusive but are applied more widely. Using quarterly confidential supervisory data for large euro area banks between 2020 and 2024, we employ a Difference-in-Differences framework with an event-study design to capture the effects of these activities on the coverage ratio of banks’ commercial real estate portfolios. We find that on-site inspections are followed by persistent increases in coverage ratios, while targeted reviews are associated with immediate improvements which are significant but short-lived. The results highlight the complementary nature of the two activity types, which have different outreach possibilities and effects. JEL Classification: G21, G28, R30, C23 |
| Keywords: | bank provisioning, commercial real estate, supervisory activities, supervisory effectiveness |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263247 |
| By: | Schlogl, Lukas; Mayr, Stefan; Papatheophilou, Simela; Raza, Werner |
| Abstract: | The Treaty on the Functioning of the European Union defines poverty reduction and, in the long term, poverty eradication as the primary objective of EU development cooperation. Yet recent initiatives by the European Commission, notably Global Gateway and the proposed Global Europe instrument, place an increasing emphasis on competitiveness, strategic autonomy, infrastructure, migration cooperation, critical raw materials and geopolitical influence. This Policy Note, based on an in-depth study1 , argues that European interests have always been part of EU development policy, but that the current shift changes both their visibility and weight. The emerging policy challenge is to keep development objectives operational when they compete with other priorities. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:oefsep:341390 |
| By: | Maczulskij, Terhi |
| Abstract: | Abstract TThe EU ETS is the main climate policy instrument in the European Union. By putting a price on carbon emissions, it aims to reduce GHG emissions while encouraging firms to adopt cleaner technologies. This policy brief summarizes the results from the recent paper examining the effects of the EU ETS on productivity, innovation activity, and environmental performance among Finnish energy-intensive firms. The analysis is based on various firm-level datasets covering the period 2000–2020. The data include financial statements, emissions, energy use, innovation activity, and R&D expenditure. Causal effects are identified by exploiting the staggered difference-in-difference method. The results show that the EU ETS did not reduce firms’ productivity or R&D expenditure. At the same time, regulated firms became significantly more likely to introduce both process and product innovations. In addition, energy intensity declined by approximately ten percent following regulation. These findings suggest that carbon pricing can stimulate technological adaptation and innovation without generating measurable costs on firm competitiveness. The innovation effects appear to arise primarily through technology adoption and process improvements rather than increased R&D inputs. Overall, the results support the use of climate policies as an effective tool for promoting the green transition while maintaining economic performance. |
| Keywords: | EU ETS, Innovation, Productivity |
| JEL: | D24 O31 O33 Q52 Q58 |
| Date: | 2026–06–08 |
| URL: | https://d.repec.org/n?u=RePEc:rif:briefs:181 |
| By: | Marta García-Rodríguez (Banco de España); Clemente Pinilla-Torremocha (Bank of England and European Research University) |
| Abstract: | We show that the joint behavior of confidence measures and unemployment in a panel of European countries favors a view of labor market fluctuations driven largely by a shock that does not affect unemployment contemporaneously but affects it persistently over business-cycle horizons and explains the majority of the forecast error variance of confidence measures. This shock is captured in firm and household surveys and is almost perfectly correlated (-0.95) with non-technological disturbances driving the long-run behavior of unemployment, but only modestly correlated with shocks affecting long-run productivity. One structural interpretation is that it represents news about future non-technological fundamentals, which is first captured in confidence measures. This shock accounts for 50% of unemployment variance at business-cycle frequency. It behaves as a mildly inflationary and transitory demand shock, raising investment, wages, interest rates, fiscal surplus and vacancies, is orthogonal to identified monetary policy shocks, and induces professional forecasters to revise unemployment expectations downward. |
| Keywords: | non-technological news shocks, unemployment fluctuations, confidence measures, panel FAVAR, mixed-frequencies |
| JEL: | C32 D83 E24 E30 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2616e |
| By: | Meryem Gökten (The Vienna Institute for International Economic Studies, wiiw); Philipp Heimberger (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | This paper examines the role of ageing costs in the reformed EU fiscal rules. Governments must pre-emptively tighten fiscal policy to offset projected ageing cost increases, but required adjustments depend on underlying assumptions. Using alternative scenarios, we show that small changes in ageing cost assumptions can lead to marked differences in debt paths and consolidation needs. The framework ignores ageing-related uncertainty in these projections. Lower ageing costs may even raise long-run debt by reducing upfront tightening. Overall, our results highlight that fiscal adjustment requirements – and their economic effects – are highly sensitive to uncertain and arbitrary ageing-related assumptions. |
| Keywords: | Ageing costs, fiscal policy, fiscal rules, austerity, public debt, debt sustainability |
| JEL: | E62 J11 J14 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:wii:wpaper:276 |
| By: | Aya Elewa (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po); Sébastien Bock (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po); Evens Salies (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po); Lionel Nesta (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur, OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po) |
| Abstract: | Cet article documente le décrochage économique européen vis-à-vis des États-Unis depuis le début des années 2000. Il documente l'élargissement de l'écart de PIB par habitant et en identifie les principaux moteurs à l'aide d'indicateurs simples et comparables. L'analyse montre que ce décrochage repose avant tout sur des gains de productivité plus faibles en Europe, un déficit structurel d'investissement privé - notamment immatériel - et une dégradation des performances commerciales dans plusieurs grandes économies, en particulier la France. L'article se limite volontairement à un état des lieux rigoureux, conçu comme un point de départ pour les analyses du numéro spécial. |
| Keywords: | désindustrialisation, compétitivité, performance commerciale, investissement, ralentissement de la productivité, économie européenne |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05626050 |
| By: | Lionel Nesta (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur, OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po) |
| Abstract: | La question du décrochage productif européen s'est imposée avec une force nouvelle dans le débat public au cours des derniers mois. Certes, plusieurs travaux avaient déjà attiré l'attention sur l'affaiblissement relatif de l'économie européenne (e.g. Gallois, 2012). Mais plus récemment, le rapport Draghi (Draghi, 2024) a donné à cette inquiétude une portée politique et institutionnelle inédite en soulignant le déficit d'investissement et les fragilités de compétitivité de l'Union européenne. Dans le même temps, des contributions plus analytiques sont venues documenter ce diagnostic. Les Policy brief de l'OFCE (Bock et al. 2024 ; 2025b) mettent ainsi en évidence l'élargissement de l'écart de PIB par habitant entre la zone euro et les États-Unis, tandis que les travaux de Bergeaud (2024) ont montré, dans une perspective de plus longue période, la divergence des trajectoires de productivité. Mais ce qui était jusque-là surtout porté par des rapports et des travaux spécialisés est désormais devenu un objet de discussion de premier plan. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05626126 |